Case Study Description of Kmart and ESL Investments (A)
A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.
Swot Analysis of "Kmart and ESL Investments (A)" written by Stuart C. Gilson, Sarah L. Abbott includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kmart's Reorganized facing as an external strategic factors. Some of the topics covered in Kmart and ESL Investments (A) case study are - Strategic Management Strategies, Financial analysis, Financial management, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Kmart and ESL Investments (A) casestudy better are - – increasing government debt because of Covid-19 spendings, increasing commodity prices, there is backlash against globalization, geopolitical disruptions, supply chains are disrupted by pandemic , wage bills are increasing, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Kmart and ESL Investments (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Kmart and ESL Investments (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kmart's Reorganized, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kmart's Reorganized operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Kmart and ESL Investments (A) can be done for the following purposes –
1. Strategic planning using facts provided in Kmart and ESL Investments (A) case study
2. Improving business portfolio management of Kmart's Reorganized
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kmart's Reorganized
Strengths Kmart and ESL Investments (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kmart's Reorganized in Kmart and ESL Investments (A) Harvard Business Review case study are -
Training and development
– Kmart's Reorganized has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Kmart and ESL Investments (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Kmart's Reorganized is one of the most innovative firm in sector. Manager in Kmart and ESL Investments (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Kmart's Reorganized is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Kmart's Reorganized is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Kmart and ESL Investments (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Kmart's Reorganized is one of the leading recruiters in the industry. Managers in the Kmart and ESL Investments (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Kmart's Reorganized digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kmart's Reorganized has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Kmart's Reorganized has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kmart's Reorganized to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Kmart's Reorganized in the sector have low bargaining power. Kmart and ESL Investments (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kmart's Reorganized to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Kmart's Reorganized has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Kmart and ESL Investments (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Kmart's Reorganized is present in almost all the verticals within the industry. This has provided firm in Kmart and ESL Investments (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of Kmart's Reorganized in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Kmart's Reorganized has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kmart's Reorganized has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Kmart's Reorganized has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Kmart and ESL Investments (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kmart and ESL Investments (A) are -
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Kmart's Reorganized supply chain. Even after few cautionary changes mentioned in the HBR case study - Kmart and ESL Investments (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kmart's Reorganized vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Kmart and ESL Investments (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Kmart's Reorganized has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Kmart's Reorganized, firm in the HBR case study Kmart and ESL Investments (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Kmart's Reorganized has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Lack of clear differentiation of Kmart's Reorganized products
– To increase the profitability and margins on the products, Kmart's Reorganized needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study Kmart and ESL Investments (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kmart's Reorganized 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Kmart and ESL Investments (A), it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– It come across in the case study Kmart and ESL Investments (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Kmart and ESL Investments (A) can leverage the sales team experience to cultivate customer relationships as Kmart's Reorganized is planning to shift buying processes online.
Interest costs
– Compare to the competition, Kmart's Reorganized has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Kmart's Reorganized has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Kmart's Reorganized needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Kmart and ESL Investments (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Kmart and ESL Investments (A) are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kmart's Reorganized in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kmart's Reorganized can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Kmart's Reorganized has opened avenues for new revenue streams for the organization in the industry. This can help Kmart's Reorganized to build a more holistic ecosystem as suggested in the Kmart and ESL Investments (A) case study. Kmart's Reorganized can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Kmart's Reorganized has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kmart's Reorganized is facing challenges because of the dominance of functional experts in the organization. Kmart and ESL Investments (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Kmart's Reorganized can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Kmart's Reorganized can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Kmart's Reorganized to increase its market reach. Kmart's Reorganized will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Leveraging digital technologies
– Kmart's Reorganized can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kmart's Reorganized can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Kmart's Reorganized can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kmart's Reorganized can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Kmart and ESL Investments (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Learning at scale
– Online learning technologies has now opened space for Kmart's Reorganized to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Kmart's Reorganized has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Kmart and ESL Investments (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kmart's Reorganized to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Kmart and ESL Investments (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Kmart and ESL Investments (A) are -
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Kmart's Reorganized.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Kmart and ESL Investments (A), Kmart's Reorganized may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Kmart's Reorganized will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kmart's Reorganized in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Kmart's Reorganized can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Kmart's Reorganized has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Kmart's Reorganized needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Kmart's Reorganized in the Finance & Accounting sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Kmart's Reorganized with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Environmental challenges
– Kmart's Reorganized needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Kmart's Reorganized can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
High dependence on third party suppliers
– Kmart's Reorganized high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Increasing wage structure of Kmart's Reorganized
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Kmart's Reorganized.
Regulatory challenges
– Kmart's Reorganized needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Kmart and ESL Investments (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Kmart and ESL Investments (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Kmart and ESL Investments (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Kmart and ESL Investments (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Kmart and ESL Investments (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Kmart's Reorganized needs to make to build a sustainable competitive advantage.
